Article 17: The use of protected content by online content-sharing service providers. The value gap provision

This article has been also published on the EACCNY website on February 1, 2022.

Legislative Decree no. 177/2021 entered into force on December 12, 2021, and transposed Directive (EU) 2019/790 on copyright and related rights in the Digital Single Market (“DSM Copyright Directive”) by amending Italian law no. 633/1941 (“Copyright Law”).

Article 17, the so-called “value gap” provisions, was transposed in a whole new Title of the Copyright Law governing the use of protected content by online content sharing service providers (“OCSSPs”). For the first time, specific rules and exceptions have been set out in relation to content uploaded on Internet platforms by their users, establishing that the online use of works and other protected materials amounts to a copyright-relevant act that, as such, shall normally be authorized. In this sense, the provision aims to foster the development of the licensing market between rightsholders and OCSSPs, for whom a liability regime is introduced unless several conditions are met, amending the liability exemption introduced by Directive 2000/31/EC (“E-Commerce Directive”).

From hosting to content sharing: A brave new world for Internet platforms

As it emerged not only from a policy perspective, but also in terms of the lawmaking and transposition process, the subject matter at the heart of Article 17 is both intricate and unique in the copyright world.

First, the breakdown: what was a single Article in the DSM Copyright Directive has been broken down by the Italian legislator into as many as five provisions (Articles 102-sexies to 102-decies). However, despite this fragmentation, the wording of the provisions appears generally faithful to that of the EU Directive, except for a few deviations as will be discussed below.

Secondly, the placement: the new Articles 102-sexies ff. follow the provisions of the Copyright Law devoted to database rights and technological protection measures, which implemented previous directives aimed at harmonizing Member State laws to keep them up to speed with progress made in the context of the information society. The implementation of Article 17 in a standalone Title, after other technologically driven sets of provisions, suggests the particular nature of the legal regime in comment – applicable to a very specific environment – and its innovative spirit, aimed at facing the challenges posed by the expansion of the online content market.

In fact, the explanatory memorandum to the draft Italian transposition of August 5, 2021 decree (full text accessible here) clarified that Articles 102-sexies ff. were indeed necessary for the Copyright Law to be adequately equipped to cope with the technological race and progress of the last decade. Similarly, guidelines on Article 17 were issued by the European Commission and addressed to the European Parliament and the Council, released on June 4, 2021 (full text accessible here). In particular, the Commission guidelines stressed that the objective of the DSM Copyright Directive is to modernize the EU legal framework on copyright, adapting it to the contemporary digital environment and ensuring a high level of protection of copyright and related rights. In this context, the aim of both Article 17 and the Italian implementing provisions is to remedy the uncontrolled circulation of intellectual works and other subject matter by updating the copyright rules, seeking to achieve a fair balance between the rights and interests of authors and other rightsholders, on the one hand, and of users on the other.

The making available of protected content uploaded by users: A copyright-relevant act

The cornerstone of the new system is the rule by which, when granting access to the public to copyrighted works or other protected subject matter uploaded by their users, OCSSPs are performing acts of communication or of making available to the public for which they will obtain authorization from rightsholders – including through the conclusion of a license agreement[1]. This is established by Article 102-sexies, para. 3, and is consistent with Article 17(1-3). A first peculiarity of the Italian transposition is, however, that such license agreements can be obtained directly from rightsholders or through collective management organizations and independent management entities[2].

For the purposes of identifying the subjective scope of application of such a new rule, Article 102-sexies, para. 1 provides that OCSSPs – “online content-sharing service providers” are providers of information society services, and (one of) their main purposes is to store and give the public access to a large amount of copyright-protected works or other protected materials uploaded by their users, which they organize and promote for profit-making purposes. This notion reflects that of Article 2(6) of the DSM Copyright Directive, with the only difference that according to the Italian implementation, OCSSPs can be defined as such, irrespective of whether they have the aim of profiting “directly or indirectly” from their users’ content-sharing activities they carry out.

In terms of exceptions, similarly to the DSM Copyright Directive, Article 102-sexies, para. 2 excludes not-for-profit online encyclopedias, educational and scientific repositories, open source software-developing and sharing platforms, providers of electronic communication services, providers of online marketplaces, business-to-business and cloud services that allow users to upload copyrighted content for personal use from qualifying as OCSSPs, unless – and here is another addition courtesy of the Italian implementation – the online marketplace or cloud service enables the sharing of copyrighted works among multiple users. The guidelines of the Commission on Article 17 clarified that the list of service providers exempted from the scope of application as set out in Article 2(6) is non-exhaustive; in the silence of the implementing provisions, these too should be regarded as without limitation.

Once granted, the authorization obtained by OCSSPs shall also cover acts performed by users who upload protected content onto their platforms, if they are not acting on a commercial basis or if their activity does not generate significant revenue. In accordance with the indications of the Commission in its guidelines on Article 17, the Italian legislator did not set out a quantitative threshold when transposing the notion of “significant revenues[3].

The liability regime with peculiar features

Article 16 of Legislative Decree No. 70/2003 (implementing the E-Commerce Directive) states that when ISPs perform an act of communication to the public or an act of making available to the public, they benefit from a limitation of liability under certain conditions, i.e. (a) the ISP does not have actual knowledge of the illegal activity or information and, as regards claims for damages, is not aware of facts or circumstances from which the illegal activity or information is apparent; b) the ISP, upon gaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information).

In this scenario, Article 102-septies sets out an exemption regime, identifying the conditions that must occur for OCSSPs not to incur liability in the event it was not possible to obtain authorization from rightsholders. The provision implements Article 17(4-5) and the relevant conditions mostly verbatim, though it states that the following requirements shall be cumulatively met: namely OCSSPs shall (i) have made their “maximum efforts” to obtain an authorization in accordance with a high standard of professional diligence in the sector; (ii) have made their “maximum efforts”, also in accordance with a high standard of professional diligence in the relevant sector, to ensure that works and other subject matter for which they have received the relevant and necessary information from rightsholders are not made available; and (iii) demonstrate that they have, following a sufficiently substantiated notification from rightsholders, promptly disabled access to or removed from their websites the works or other subject matter that were the subject of the notification, and have used their best efforts to prevent their upload in the future.

In the explanatory memorandum to the implementing decree, the Italian legislator clarified that the reference to industry standards of high professional diligence as a criterion for defining “massimi sforzi” (back translation: “maximum efforts”) is taken from Article 17 and from Recital 66 of the DSM Copyright Directive[4]; moreover, such wording describes the level of diligence required to consider that the “massimi sforzi” conditions have been met, in light of the principle of reasonableness. To determine (on a case-by-case basis) whether OCSSPs have indeed met the maximum effort standard, the following elements, among others,  shall be taken into account: (i) the type, audience and size of the service and the type of works or other materials uploaded by the users of the service; (ii) the availability of adequate and effective tools; and (iii) the relevant cost for the service providers. Paragraph 3 details that providers shall promptly provide rightsholders, at their request, with complete and adequate information on how to implement the provisions referred to in paragraph 1 and, where licensing agreements are concluded between service providers and rightsholders, with information on the use of the content covered by the agreements. Paragraph 4 provides that the application of the provisions of Title II-quater does not impose any general monitoring obligation on OCSSPs.

According to the Italian Competition Authority[5], Article 102-septies would be capable of unjustifiably restricting competition, while the rationale of Article 17 is to “bridge the gap” between the economic value produced by a piece of user-generated content and the remuneration recognized to the holders of the rights (so-called “value gap”, as recalled above).

Consistent with the DSM Copyright Directive, mitigated obligations shall apply to OCSSPs that have been available to the public for less than three years and have an annual turnover of less than EUR 10 million, as indicated in Article 102-octies.

On the other hand, Article 102-nonies contains rules on cooperation between platforms and rightsholders, promoting the availability of works or other materials uploaded by users (which do not infringe copyright or related rights), while also safeguarding the case where such works or other materials are subject to an exception or limitation. Indeed, users may make use of the exceptions or limitations in the following cases: a) quotation, criticism, review; b) use for caricature, parody, or pastiche. Notice of this opportunity shall be given by OCSSPs in their terms and conditions.

As to the so-called complaint and redress mechanism (essentially, a procedure for the removal of content that OCSSPs must make available to their users), this should allow a preliminary, non-litigation venue for dispute resolution, where users can question the fairness of the disabling or removal of their allegedly infringing content. In particular, the provision requires that rightsholders who intend to file a complaint to an OCSSP, when asking to disable or remove works made available by users without their authorization, shall indicate the reasons for the request, which shall be sufficiently grounded. In the event of a positive decision, OCSSPs must notify users of the disabling or removal without delay. The decisions of OCSSPs are subject to human review, consistently with Article 17. In this context, OCSSPs are required to set up a rapid and effective procedure so that users can challenge the decision taken. To this end, the Italian Communications Authority (AGCOM) must adopt appropriate guidelines. Pending the decision on the complaint, the purportedly infringing content will remain disabled – a peculiarity of the Italian implementation. Lastly, in the event of a dispute on the decision adopted by the OCSSPs, the parties may refer the decision to AGCOM. The procedure must follow the rules set down by AGCOM itself through a specific regulation, to be adopted within 60 days from the date of entry into force of the implementation decree. This Alternative Dispute Resolution (ADR) is without prejudice to the parties’ right to take the matter to court.

New exceptions: Parody, from case law to law

Caricature, parody, or pastiche are expressly exempted not in Article 102-nones para. 2, provided that the necessary conditions are met – in addition to the exceptions already provided in the Copyright Law for quotation, i.e., criticism and review. Until now, the Italian copyright system lacked a provision expressly permitting the use of protected content for parody, as allowed – but not required – by Article 5(2)(k) of the InfoSoc Directive.

The parody exception has been developed and applied by Italian courts long before the entry into force of Article 102-nonies and was grounded in fundamental principles such as freedom of expression, enshrined in Article 21 of the Constitution. This was confirmed in cases where the parody was directed not at the criticism of the original work or its author or whoever was portrayed in it, but at the thought or behavior of third parties (see, amongst others, Court of Milan, February 1, 2001, which acknowledged the applicability of the exception in the case of a film poster altered for political satire purposes). Following the landmark decision of the Court of Justice of the European Union (Judgment No. 201 of September 3, 2014), Italian courts have also begun to apply the CJEU’s definition of “parody” as a guide. According to this, to justify the use of protected content, parody shall (i) be noticeably different, to the point that the work can be considered as “independent and distinct” from the original; (ii) express humor or mockery, and shall not resort to a gratuitous or destructive attack on the honor or reputation of the subject. Of note, Article 102-nonies introduces this exception in the specific context of OCSSPs. It is left open for discussion whether this amendment will increase the flexibility of the Italian courts when dealing with parodic content spread “offline”.

[1] In its guidelines on Article 17, the Commission clarified that Article 17(1) of the DSM Copyright Directive does not prescribe how authorizations may be obtained from rightsholders, as both such legal provision and this recital are drafted in an open-ended way and refer to “authorization…including [via] a licensing agreement”. Member States are therefore free to provide for different authorization models to “foster the development of the licensing market”, which is one of the main goals of Article 17 of the Directive.

[2] As referred to in Legislative Decree No. 35 of March 15, 2017, transposing Directive 2014/26/UE (“CRM Directive”).

[3] According to the Commission guidelines on Article 17, this concept should be examined on a case-by-case basis, by reference to all the circumstances of the user’s activity in question.

[4] The Italian wording used in Recital 66 of the DSM Copyright Directive is as follows: “[…] Nel valutare se un prestatore di servizi di condivisione di contenuti online ha compiuto i massimi sforzi [this could be translated literally to “maximum efforts”] nel rispetto di elevati standard di diligenza professionale di settore, occorre considerare se […]”. The English version of Recital 66 reads “When assessing whether an online content-sharing service provider has made its best efforts [based on a literal translation, the corresponding Italian wording would be “migliori sforzi”] in accordance with the high industry standards of professional diligence, account should be taken of […]”.

[5] Access the full text of the Opinion by the Italian Antitrust Authority on the draft of the Italian Legislative Decree here.

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